4. Loans, net and allowance for loan losses:

The major classifications of loans outstanding, net of deferred loan origination fees and costs at December 31, 2018 and 2017 are summarized as follows. Net deferred loan costs included in loan balances were $744 and $575 in 2018 and 2017, respectively.


		December 31, 2018		December 31, 2017
Commercial	$	494,134	$	476,199
Real estate:
Commercial		907,803		786,210
Residential		299,876		287,935
Consumer		121,453		142,721
Total	$	1,823,266	$	1,693,065

Loans outstanding to directors, executive officers, principal stockholders or to their affiliates totaled $14,701 and $15,169 at December 31, 2018 and 2017, respectively. Advances and repayments during 2018 totaled $1,657 and $1,947 respectively. There were no related party loans that were classified as nonaccrual, past due, or restructured at December 31, 2018 and 2017.

Deposits from related parties amounted to $16.2 million at December 31, 2018 and $10.0 million at December 31, 2017.

At December 31, 2018, the majority of the Company’s loans were at least partially secured by real estate in the eastern Pennsylvania and southern tier New York counties. Therefore, a primary concentration of credit risk is directly related to the real estate market in these regions. Changes in the general economy, local economy or in the real estate market could affect the ultimate collectability of this portion of the loan portfolio. Management does not believe there are any other significant concentrations of credit risk that could affect the loan portfolio.

The changes in the allowance for loan losses account by major classification of loan for the year ended December 31, 2018, 2017, and 2016 were as follows:


			Real estate
December 31, 2018	Commercial		Commercial		Residential		Consumer		Unallocated	Total
Allowance for loan losses:
Beginning balance	$	5,513	$	8,944	$	3,111	$	1,392	$	$	18,960
Charge-offs		(154)		(1,250)		(405)		(545)			(2,354)
Recoveries		137		136		98		202			573
Provisions		20		2,906		1,088		186			4,200
Ending balance	$	5,516	$	10,736	$	3,892	$	1,235	$	$	21,379
Ending balance: individually evaluated for impairment		50		403		666		60			1,179
Ending balance: collectively evaluated for impairment	$	5,466	$	10,333	$	3,226	$	1,175		$	20,200
Loans receivable:
Ending balance	$	494,134	$	907,803	$	299,876	$	121,453	$	$	1,823,266
Ending balance: individually evaluated for impairment		2,237		3,121		4,071		212			9,641
Ending balance: collectively evaluated for impairment	$	491,897	$	904,682	$	295,805	$	121,241	$	$	1,813,625


			Real estate
December 31, 2017	Commercial		Commercial		Residential		Consumer		Unallocated	Total
Allowance for loan losses:
Beginning balance	$	4,452	$	7,548	$	2,961	$	1,000	$	$	15,961
Charge-offs		(173)		(706)		(533)		(737)			(2,149)
Recoveries		20		124		44		160			348
Provisions		1,214		1,978		639		969			4,800
Ending balance	$	5,513	$	8,944	$	3,111	$	1,392	$	$	18,960
Ending balance: individually evaluated for impairment		159		263		336		8			766
Ending balance: collectively evaluated for impairment	$	5,354	$	8,681	$	2,775	$	1,384		$	18,194
Loans receivable:
Ending balance	$	476,199	$	786,210	$	287,935	$	142,721	$	$	1,693,065
Ending balance: individually evaluated for impairment		2,463		4,289		3,793		177			10,722
Ending balance: collectively evaluated for impairment	$	473,736	$	781,921	$	284,142	$	142,544	$	$	1,682,343


			Real estate
December 31, 2016	Commercial		Commercial		Residential		Consumer		Unallocated	Total
Allowance for loan losses:
Beginning balance	$	4,113	$	4,751	$	3,174	$	937	$	$	12,975
Charge-offs		(776)		(858)		(339)		(495)			(2,468)
Recoveries		86		122		69		177			454
Provisions		1,029		3,533		57		381			5,000
Ending balance	$	4,452	$	7,548	$	2,961	$	1,000	$	$	15,961
Ending balance: individually evaluated for impairment		225		1,197		520					1,942
Ending balance: collectively evaluated for impairment	$	4,227	$	6,351	$	2,441	$	1,000	$	$	14,019
Loans receivable:
Ending balance	$	408,814	$	700,144	$	289,781	$	134,226	$	$	1,532,965
Ending balance: individually evaluated for impairment		2,687		7,157		3,580		155			13,579
Ending balance: collectively evaluated for impairment	$	406,127	$	692,987	$	286,201	$	134,071	$	$	1,519,386

The following tables present the major classification of loans summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system at December 31, 2018 and 2017:


			Special
December 31, 2018	Pass		Mention		Substandard		Doubtful	Total
Commercial	$	491,531	$	869	$	1,734	$	$	494,134
Real estate:
Commercial		886,849		8,934		12,020			907,803
Residential		295,758		357		3,761			299,876
Consumer		121,229				224			121,453
Total	$	1,795,367	$	10,160	$	17,739	$	$	1,823,266


			Special
December 31, 2017	Pass		Mention		Substandard		Doubtful	Total
Commercial	$	472,185	$	1,958	$	2,056	$	$	476,199
Real estate:
Commercial		764,320		13,015		8,875			786,210
Residential		282,484		18		5,433			287,935
Consumer		142,507				214			142,721
Total	$	1,661,496	$	14,991	$	16,578	$	$	1,693,065

Information concerning nonaccrual loans by major loan classification at December 31, 2018 and 2017 is summarized as follows:


		2018		2017
Commercial	$	776	$	860
Real estate:
Commercial		2,663		3,821
Residential		2,580		2,994
Consumer		212		177
Total	$	6,231	$	7,852

The major classification of loans by past due status at December 31, 2018 and 2017 are summarized as follows:


					Greater								Loans > 90
	30-59 Days		60-89 Days		than 90		Total Past						Days and
December 31, 2018	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing
Commercial	$	973	$	79	$	776	$	1,828	$	492,306	$	494,134
Real estate:
Commercial		1,889		218		2,736		4,843		902,960		907,803	$	73
Residential		2,486		1,545		3,430		7,461		292,415		299,876		850
Consumer		756		292		212		1,260		120,193		121,453
Total	$	6,104	$	2,134	$	7,154	$	15,392	$	1,807,874	$	1,823,266	$	923


					Greater								Loans > 90
	30-59 Days		60-89 Days		than 90		Total Past						Days and
December 31, 2017	Past Due		Past Due		Days		Due		Current		Total Loans		Accruing
Commercial	$	124	$	216	$	860	$	1,200	$	474,999	$	476,199
Real estate:
Commercial		1,722		194		3,821		5,737		780,473		786,210
Residential		1,134		1,551		3,543		6,228		281,707		287,935	$	549
Consumer		1,101		364		363		1,828		140,893		142,721		186
Total	$	4,081	$	2,325	$	8,587	$	14,993	$	1,678,072	$	1,693,065	$	735

The following tables summarize information concerning impaired loans as of and for the years ended December 31, 2018, 2017 and 2016 by major loan classification:


							For the Year Ended
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
December 31, 2018	Investment		Balance		Allowance		Investment		Recognized
With no related allowance:
Commercial	$	1,562	$	1,900			$	1,318	$	67
Real estate:
Commercial		1,969		2,299				2,822		28
Residential		1,970		2,658				2,193		22
Consumer		152		160				135
Total		5,653		7,017				6,468		117
With an allowance recorded:
Commercial		675		675		50		1,006		30
Real estate:
Commercial		1,152		1,323		403		1,676		18
Residential		2,101		2,328		666		1,585		22
Consumer		60		60		60		21
Total		3,988		4,386		1,179		4,288		70
Total impaired loans
Commercial		2,237		2,575		50		2,324		97
Real estate:
Commercial		3,121		3,622		403		4,498		46
Residential		4,071		4,986		666		3,778		44
Consumer		212		220		60		156
Total	$	9,641	$	11,403	$	1,179	$	10,756	$	187


							For the Year Ended
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
December 31, 2017	Investment		Balance		Allowance		Investment		Recognized
With no related allowance:
Commercial	$	1,279	$	1,439			$	1,668	$	43
Real estate:
Commercial		2,888		3,190				2,985		24
Residential		2,196		2,672				2,227		21
Consumer		169		181				173
Total		6,532		7,482				7,053		88
With an allowance recorded:
Commercial		1,184		1,218		159		991		50
Real estate:
Commercial		1,401		1,496		263		2,202		18
Residential		1,597		1,759		336		1,335		23
Consumer		8		8		8		20
Total		4,190		4,481		766		4,548		91
Total impaired loans
Commercial		2,463		2,657		159		2,659		93
Real estate:
Commercial		4,289		4,686		263		5,187		42
Residential		3,793		4,431		336		3,562		44
Consumer		177		189		8		193
Total	$	10,722	$	11,963	$	766	$	11,601	$	179


							For the Year Ended
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
December 31, 2016	Investment		Balance		Allowance		Investment		Recognized
With no related allowance:
Commercial	$	2,404	$	3,213			$	1,461	$	48
Real estate:
Commercial		2,364		3,018				4,300		71
Residential		2,205		2,388				2,133		35
Consumer		155		155				147
Total		7,128		8,774				8,041		154
With an allowance recorded:
Commercial		283		283	$	225		859
Real estate:
Commercial		4,793		4,793		1,197		2,366		2
Residential		1,375		1,376		520		1,185		7
Consumer								50
Total		6,451		6,452		1,942		4,460		9
Total impaired loans
Commercial		2,687		3,496		225		2,320		48
Real estate:
Commercial		7,157		7,811		1,197		6,666		73
Residential		3,580		3,764		520		3,318		42
Consumer		155		155				197
Total	$	13,579	$	15,226	$	1,942	$	12,501	$	163

There were no amounts of interest income recognized using the cash-basis method on impaired loans for the years ended December 31, 2018, 2017 and 2016.

Included in the commercial loan, commercial real estate and residential real estate categories are troubled debt restructurings that were classified as impaired. Trouble debt restructurings totaled $2,779 and $3,074 at December 31, 2018 and 2017 respectively.

There was one loan modified in 2018, six loans modified in 2017 and three loans modified in 2016 that resulted in troubled debt restructurings. The following tables summarize the loans whose terms have been modified resulting in troubled debt restructurings during the year ended December 31, 2018 and 2017 and 2016.


		Pre-Modification		Post-Modification
	Number	Outstanding Recorded		Outstanding		Recorded
December 31, 2018	of Contracts	Investment		Recorded Investment		Investment
Commercial real estate	1	$	340	$	340	$	340
Total	1	$	340	$	340	$	340

		Pre-Modification		Post-Modification
	Number	Outstanding Recorded		Outstanding		Recorded
December 31, 2017	of Contracts	Investment		Recorded Investment		Investment
Commercial	2	$	885	$	885	$	864
Commercial real estate	3		721		721		700
Residential mortgage	1		64		64		64
Total	6	$	1,670	$	1,670	$	1,628

		Pre-Modification		Post-Modification
	Number	Outstanding Recorded		Outstanding		Recorded
December 31, 2016	of Contracts	Investment		Recorded Investment		Investment
Commercial	1	$	1,500	$	1,150	$	1,150
Commercial real estate
Residential mortgage	2		216		216		207
Total	3	$	1,716	$	1,366	$	1,357

There were no payment defaults within 12 months of its modification on loans considered troubled debt restructurings for the years ended December 31, 2018 and December 31, 2017 and one payment default for the year ended December 31, 2016 totaling $43.

The amount of residential loans in the formal process of foreclosure totaled $1,823 at December 31, 2018 and $1,684 at December 31, 2017.